The main goal of a pension fund manager is sustainability. We propose an Asset and Liability Management model structured as a multi-stage stochastic programming problem adopting a discrete scenario tree and a multi-objective function. Among other constraints, we consider the second-order stochastic dominance with respect to a benchmark portfolio. To protect the pension fund from shocks, we test the inclusion of hedge financial contracts in the form of put options and, moreover, we stress the portfolio introducing a new scenario tree contamination technique, namely the nodal contamination. Numerical results show that we can efficiently manage the pension fund satisfying several targets such as liquidity, returns, sponsor's extraordinary contribution and funding gap. Moreover, we test the sensitivity with respect to put option strikes and to the stochastic dominance constraints. Finally, we demonstrate the effect of the scenario tree contamination.

(2019). Pension fund management with hedging derivatives, stochastic dominance and nodal contamination [journal article - articolo]. In OMEGA. Retrieved from http://hdl.handle.net/10446/128493

Pension fund management with hedging derivatives, stochastic dominance and nodal contamination

Moriggia, Vittorio;Vitali, Sebastiano
2019-01-01

Abstract

The main goal of a pension fund manager is sustainability. We propose an Asset and Liability Management model structured as a multi-stage stochastic programming problem adopting a discrete scenario tree and a multi-objective function. Among other constraints, we consider the second-order stochastic dominance with respect to a benchmark portfolio. To protect the pension fund from shocks, we test the inclusion of hedge financial contracts in the form of put options and, moreover, we stress the portfolio introducing a new scenario tree contamination technique, namely the nodal contamination. Numerical results show that we can efficiently manage the pension fund satisfying several targets such as liquidity, returns, sponsor's extraordinary contribution and funding gap. Moreover, we test the sensitivity with respect to put option strikes and to the stochastic dominance constraints. Finally, we demonstrate the effect of the scenario tree contamination.
articolo
2019
Moriggia, Vittorio; Kopa, Miloš; Vitali, Sebastiano
(2019). Pension fund management with hedging derivatives, stochastic dominance and nodal contamination [journal article - articolo]. In OMEGA. Retrieved from http://hdl.handle.net/10446/128493
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10446/128493
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